Inflation

Federal Reserve Gov. Christopher Waller, a Trump appointee, said that while recent inflation readings are concerning, monetary policy would remain restrictive even if the central bank cuts interest rates by another quarter-point this month.

Traders are pricing in 34 basis points worth of easing at the Fed's September gathering, trimming their expectations from a day earlier — and lowering the odds of a half-point cut at the next central bank meeting to about one-third.

The figures, to be published Wednesday by the Bureau of Labor Statistics, will probably show the consumer price index, and a "core" gauge excluding food and energy, both advanced 0.2% in July.

The irony is, Trump's platform — including tax cuts, tariff increases and a crackdown on immigration — would, in the view of many economists and investors, stoke price pressures.

Optimism tied to an ebb in inflation was on full display this week in US government debt, with yields across the curve slumping as the data was seen supporting the case for lower borrowing costs as soon as September.

Optimism over lower rates spurred a shift into riskier corners of Wall Street — as money exited the long-favored safety trade of technology megacaps.

Stubborn inflation is expected to work its way down, but combined with higher-for-longer interest rates, consumers are feeling the effects differently across the credit spectrum.

In sessions on Tuesday, panelists said although inflation is sticky, long-term inflation expectations are very well anchored and he consumer picture is not as dire as previously thought, allowing certain risk markets to embrace a soft landing.

The so-called core consumer price index climbed 0.3% from March, snapping a streak of three above-forecast readings which spurred concern that inflation was becoming entrenched.